Learn 200 Edexcel Economics A words for explaining market mechanisms, interpreting data and evaluating policy. Each word has a plain-English meaning and an example.
Edexcel Economics A 9EC0 has three two-hour papers of 100 marks each. Papers 1 and 2 count for 35% each. Paper 3, which brings together microeconomics and macroeconomics, counts for 30%.
200 essay vocabulary words and examples
Economic mechanisms and evaluation
- allocative efficiency — a situation where resources match the pattern of social benefits and costs, with marginal social benefit equal to marginal social cost at an interior optimum. show where allocative efficiency occurs in the model.
- productive efficiency — production at the lowest possible cost for a given output and technology. check whether the firm is producing at minimum average cost.
- dynamic efficiency — improvements in efficiency over time through innovation or investment. weigh possible dynamic efficiency gains against current prices.
- consumer surplus — the difference between willingness to pay and the amount paid. show how the price rise affects consumer surplus.
- producer surplus — the difference between the price received and the minimum sellers would accept. identify producer surplus on the diagram.
- deadweight loss — a loss of total surplus from an inefficient outcome. relate deadweight loss to units that are overproduced or underproduced.
- tax incidence — how the economic burden of a tax is shared. use relative elasticities to explain tax incidence.
- asymmetric information — a situation where one party has more relevant information than another. show how asymmetric information can affect insurance choices.
- contestability — the ease with which potential rivals can enter and leave a market. low sunk costs can increase contestability.
- barrier to entry — a condition that makes it harder for a new firm to enter a market. assess whether the patent creates a barrier to entry.
- price discrimination — charging different prices for the same good or service where differences are not explained by cost. explain why resale restrictions help sustain price discrimination.
- monopsony — a market with one buyer or a buyer with substantial purchasing power. explain how monopsony power could affect wages.
- derived demand — demand for an input arising from demand for the output it helps produce. connect demand for labour to demand for the firm’s product.
- multiplier — the ratio of a change in national income to an initial change in autonomous spending. consider what leakages imply for the multiplier.
- output gap — the difference between actual and potential output. explain how a negative output gap can affect inflationary pressure.
- crowding out — a reduction in private spending that can result from increased government activity or borrowing. state the mechanism through which crowding out could occur.
- automatic stabiliser — a tax or spending feature that moderates fluctuations without a new policy decision. unemployment benefits can operate as an automatic stabiliser.
- supply-side policy — a policy intended to improve productive capacity or efficiency. compare the time lags of different supply-side policies.
- terms of trade — the ratio of export prices to import prices, typically expressed as an index. distinguish the terms of trade from the trade balance.
- comparative advantage — ability to produce a good at a lower opportunity cost than another producer. compare opportunity costs to identify comparative advantage.
Market incentives and the wider economy
- consumer choice — the selection of goods and services given preferences, prices and income. a price change may alter consumer choice.
- marginal benefit — the extra benefit from one more unit or action. compare the marginal benefit of a further journey with its cost.
- price mechanism — the way prices convey information and help coordinate decisions. higher prices can signal scarcity through the price mechanism.
- extension of demand — an increase in quantity demanded caused by a fall in the good’s price. show an extension along a given demand curve.
- contraction of demand — a decrease in quantity demanded caused by a rise in the good’s price. distinguish a contraction from a fall in demand.
- complement — a good commonly used together with another good. a higher price for one complement may reduce demand for the other.
- substitute — a good that can be used in place of another. close substitutes can make demand more responsive to price.
- price elasticity of supply — the responsiveness of quantity supplied to a price change in percentage terms. spare capacity can make supply more price elastic.
- market failure — a situation in which a market allocation is inefficient. show how an external cost can lead to market failure.
- public good — a good whose use is non-rival and from which exclusion is difficult or impossible. street lighting can illustrate the public-good problem.
- information failure — an inefficient outcome arising from inadequate or uneven information. missing information about running costs may affect purchases.
- price ceiling — a legal maximum price. a binding price ceiling can lead to a shortage.
- price floor — a legal minimum price. a binding price floor can create a surplus.
- productivity — output per unit of input. measure labour productivity as output per hour.
- real GDP per capita — inflation-adjusted output divided by population. compare real GDP per capita with evidence on income distribution.
- purchasing power — the quantity of goods and services money can buy. inflation can reduce purchasing power when money income does not keep pace.
- budget deficit — an excess of government spending over revenue during a period. distinguish a budget deficit from the stock of public debt.
- trade balance — exports minus imports over a period for the categories specified. state whether the trade balance covers goods only or goods and services.
- depreciation — a fall in a currency’s value under a floating exchange rate. depreciation may raise the domestic price of imported inputs.
- protectionism — policies that limit foreign competition through trade barriers. weigh the gains and costs of protectionism for different groups.
Markets, living standards and public policy
- scarcity — limited resources relative to wants. scarcity forces households and governments to make choices.
- opportunity cost — the benefit of the next best option forgone. explain the opportunity cost of using land for parking.
- factor of production — a resource used to produce goods and services. classify a delivery van as capital rather than labour.
- specialisation — concentrating on a narrower range of tasks or products. specialisation may raise productivity through practice.
- demand — the quantity consumers are willing and able to buy at different prices in a period. a rise in income can shift demand for a normal good.
- supply — the quantity producers are willing and able to sell at different prices in a period. higher input costs may reduce supply.
- market equilibrium — the price and quantity where quantity demanded equals quantity supplied. show how a shift in demand changes equilibrium.
- shortage — a situation where quantity demanded exceeds quantity supplied at a price. a binding price ceiling can create a shortage.
- surplus — a situation where quantity supplied exceeds quantity demanded at a price. a binding price floor can create a surplus.
- price elasticity of demand — responsiveness of quantity demanded to a change in price in percentage terms. close substitutes can make demand more price elastic.
- indirect tax — a tax on spending on goods or services. an indirect tax can raise the price consumers pay.
- subsidy — financial support intended to encourage production or consumption. a subsidy can reduce a producer’s effective costs.
- external cost — a cost imposed on a third party outside a transaction. traffic noise can create an external cost for nearby residents.
- inflation — a sustained increase in the general price level. distinguish inflation from an increase in one price.
- real income — income adjusted for changes in the price level. rising prices can reduce real income when money income grows slowly.
- economic growth — an increase in real output over time. use real GDP to measure economic growth.
- unemployment — the condition of being without work while seeking and available for work, under the applicable definition. a fall in demand can increase cyclical unemployment.
- exchange rate — the price of one currency in terms of another. a depreciation can make imports more expensive in domestic currency.
- tariff — a tax on imports. compare how a tariff affects consumers and domestic producers.
- standard of living — the material conditions and resources available to people. real GDP per person gives only a partial picture of the standard of living.
Market structure and policy mechanisms
- widespread — present across many places or groups. widespread smartphone use.
- governance — how institutions make and carry out decisions. local governance shapes enforcement.
- jurisdiction — the area or matters over which an authority has legal power. within the regulator’s jurisdiction.
- tradable permit — an authorisation that can be exchanged and allows a specified activity. tradable permits place a price on emissions.
- internalise — bring an external cost or benefit into a decision-maker’s incentives. a charge may internalise an external cost.
- excludability — the ability to prevent people from using a good. excludability affects how a service can be financed.
- rivalry — the extent to which one person’s use reduces what others can use. rivalry increases when a road is congested.
- free rider — someone who benefits without contributing to the cost. a free rider may still benefit from street lighting.
- moral hazard — a change in behaviour after protection alters the cost of taking risks. insurance can create moral hazard.
- adverse selection — a distortion in who participates when one side has hidden information. adverse selection can change the mix of people insured.
- sunk cost — a cost already incurred that cannot be recovered. sunk costs may deter market entry.
- economies of scale — falls in long-run average cost as output expands. economies of scale can favour larger firms.
- normal profit — the minimum return needed to keep resources in their present use. normal profit is included in economic cost.
- supernormal profit — profit above normal profit. barriers can help sustain supernormal profit.
- prevalent — common in a particular group or setting. prevalent among younger adults.
- elasticity — responsiveness of one variable to a change in another. price elasticity affects the fall in quantity demanded.
- marginal revenue — the addition to total revenue from selling an extra unit. a firm compares marginal revenue with marginal cost.
- transfer payment — a payment made without receiving current goods or services in return. a transfer payment can change disposable income.
- trade creation — a shift to a lower-cost partner producer following trade integration. trade creation can lower production costs.
- trade diversion — a shift to a higher-cost partner producer because of preferential treatment. trade diversion can offset gains from integration.
Macroeconomic analysis
- temporary — lasting for a limited period. a temporary measure.
- disinflation — a fall in the inflation rate while prices may still be rising. disinflation reduces the rate of price increase.
- deflation — a sustained fall in the general price level. deflation can increase the real burden of debt.
- permanent — intended or expected to continue indefinitely. a permanent change.
- funding — money made available for a purpose. secure funding for a trial.
- aggregate demand — planned total expenditure on domestically produced output at a given price level. higher investment can raise aggregate demand.
- aggregate supply — total output firms are willing to produce at a given price level. higher input costs can reduce short-run aggregate supply.
- inelastic — relatively unresponsive to a change in a specified variable. inelastic demand for a necessary input.
- equilibrium — a position where opposing forces balance in the model. a new market equilibrium.
- leakage — a withdrawal from the circular flow, such as saving, taxation or imports. higher imports increase a leakage.
- injection — spending entering the circular flow through investment, government spending or exports. a rise in exports is an injection.
- fiscal policy — use of government spending and taxation to influence the economy. an expansionary fiscal policy can raise demand.
- monetary policy — central-bank action influencing monetary and financial conditions. monetary policy operates through several channels.
- transmission — the process through which a policy change affects the economy. the transmission from rates to investment can take time.
- systemic — rooted in the workings of a whole system. a systemic failure.
- regressive — placing a larger proportional burden on people with less income in a tax or charging context. a potentially regressive flat charge.
- current account — the balance-of-payments account recording trade and primary and secondary income flows. consider the effect on the current account.
- persistent — continuing over a period despite efforts or change. a persistent shortage.
- capacity — the level of output an economy or producer can sustain with available resources. spare capacity can affect the inflation response.
- hysteresis — a lasting effect of a temporary shock on the economy. long unemployment spells can contribute to hysteresis.
Taking a position
- claim — a statement you want the reader to accept. make a claim.
- stance — your position on a question. take a clear stance.
- thesis — the central position or interpretation your response develops. support the thesis.
- premise — an idea the argument starts from. question the premise.
- assumption — something treated as true without being established. test the assumption.
- assert — state a position firmly. assert that access matters.
- argue — give reasons in support of a position. argue for a trial.
- maintain — continue to hold or defend a view. maintain that the policy is fair.
- contend — put forward a position that can be challenged. contend that the proposal is workable.
- justify — give sufficient reasons for a decision or judgement. justify the expense.
- advocate — publicly support an action or change. advocate for reform.
- defend — answer criticism of a view or choice. defend a decision.
- qualify — limit a statement so it applies only where warranted. qualify the conclusion.
- concede — acknowledge a valid point made by the other side. concede that costs may rise.
- rebut — answer an opposing claim with reasoning or evidence. rebut the objection.
- counterargument — a reasoned objection to a position. address a counterargument.
- reservation — a concern that makes agreement incomplete. express a reservation.
- distinguish — show what makes two things different. distinguish cost from value.
- criteria — standards used to judge something. agree on the criteria.
- verdict — a final judgement reached after consideration. reach a verdict.
Using evidence and reasoning
- evidence — information that helps establish a claim. draw on evidence.
- example — a specific case that makes a general point clearer. give a concrete example.
- illustrate — make an idea clearer through a case or detail. illustrate the difficulty.
- demonstrate — show how or why something is true. demonstrate a connection.
- substantiate — support a claim with convincing information. substantiate the allegation.
- corroborate — provide independent support for an existing account. corroborate the witness’s account.
- infer — draw a conclusion from available clues. infer a motive from the wording.
- imply — suggest a meaning without saying it directly. imply that change is possible.
- interpret — explain what something means in context. interpret a figure in context.
- analyse — examine how parts work together. analyse the writer’s choices.
- evaluate — judge the strength, quality or value of something. evaluate the proposal.
- plausible — reasonable enough to believe given what is known. a plausible explanation.
- credible — worthy of belief or trust. a credible source.
- relevant — directly connected to the issue being considered. relevant to the question.
- sufficient — enough for the purpose or conclusion at hand. sufficient for a limited trial.
- representative — typical enough to reflect a larger group. a representative sample.
- anecdote — a brief account of a particular incident. open with an anecdote.
- limitation — something that restricts what a method or claim can establish. acknowledge a limitation.
- contradict — state or show something incompatible with another claim. contradict the earlier finding.
- synthesise — combine ideas from separate sources into a new account. synthesise competing accounts.
Connecting ideas
- whereas — introduces a clause that contrasts with another. whereas the first option costs less.
- although — introduces a fact that qualifies the main statement. although demand may rise.
- however — signals a contrast or change in direction. however, costs remain uncertain.
- nevertheless — signals that a point still holds despite a difficulty. nevertheless, the trial could go ahead.
- conversely — introduces a contrasting relationship in the reverse direction. conversely, lower demand can free capacity.
- similarly — points out a meaningful likeness. similarly, smaller groups need space.
- likewise — shows that a similar point applies elsewhere. likewise, evening users need lighting.
- consequently — introduces a result of what came before. consequently, the queue grew.
- therefore — introduces a conclusion or result that follows. therefore, a trial is justified.
- furthermore — adds a supporting point. furthermore, the existing room is free.
- specifically — narrows the discussion to a precise detail. specifically, the plan would add two sessions.
- instead — signals a replacement or different choice. instead, use the current building.
- alternatively — introduces another option. alternatively, change the timetable.
- otherwise — indicates what happens under different conditions. book early, otherwise places may fill.
- provided — introduces a condition when used with a following clause. provided that staffing is adequate.
- despite — introduces something that fails to prevent the main outcome. despite the delay.
- unlike — marks a difference between two things. unlike the previous scheme.
- respectively — matches items with values in the same stated order. costs were $5 and $8, respectively.
- overall — signals a judgement about the whole picture. overall, the benefits are modest.
- ultimately — identifies what matters after other factors are considered. ultimately, the decision depends on demand.
Explaining cause and effect
- cause — produce or bring about an outcome. cause avoidable delays.
- contribute — play a part in bringing about an outcome. contribute to overcrowding.
- trigger — set a process or reaction in motion. trigger a review.
- accelerate — make a process happen faster. accelerate the transition.
- intensify — make something stronger or more severe. intensify competition.
- exacerbate — make an existing problem worse. exacerbate existing inequalities.
- mitigate — reduce the severity or harmful effect of something. mitigate the harm.
- prevent — stop something from happening. prevent further damage.
- deter — discourage someone from taking an action. deter people from taking risks.
- enable — make an action possible. enable students to attend.
- facilitate — make an action or process easier. facilitate access to training.
- reinforce — strengthen an effect, belief or behaviour. reinforce an existing pattern.
- undermine — weaken something, often gradually. undermine public trust.
- sustain — keep something going over time. sustain the improvement.
- displace — push something or someone out of an existing place or role. displace smaller operators.
- redistribute — change how something is shared. redistribute public funds.
- consequence — an outcome that follows an action or event. an unintended consequence.
- mechanism — the process through which an effect occurs. identify the mechanism.
- correlation — a pattern in which two things vary together. observe a correlation.
- constraint — a condition that limits what can be done. work within a budget constraint.
Comparing options and weighing costs
- benefit — a useful or favourable effect. a long-term benefit.
- drawback — a feature that makes an option less attractive. a potential drawback.
- trade-off — a compromise in which gaining one thing costs another. a trade-off between cost and convenience.
- priority — something that deserves attention before competing needs. give priority to public health.
- alternative — another way of achieving a goal. offer an alternative to driving.
- feasible — possible to carry out with the available resources. a feasible timetable.
- viable — capable of working successfully over time. a viable business model.
- practical — suited to what can actually be done. a practical solution.
- effective — able to produce the intended result. an effective response to congestion.
- efficient — able to achieve a result with relatively little waste. efficient use of limited funds.
- affordable — within the means of the people expected to pay. affordable childcare.
- accessible — easy or possible for the intended users to reach or use. accessible public transport.
- equitable — fair in light of differing needs and barriers. equitable access to training.
- proportionate — appropriate in scale to the problem. a proportionate penalty.
- substantial — large enough to matter. a substantial reduction in waste.
- measure — an action taken to address a problem. introduce a temporary measure.
- outweigh — be more important than something on the other side. the benefits outweigh the costs.
- offset — counterbalance part or all of an effect. offset part of the expense.
- allocate — assign money, time or resources to a purpose. allocate funds to local schools.
- compromise — an arrangement that meets competing needs only in part. reach a workable compromise.
Exam requirements and worked examples
Know where the longer responses sit
Paper 1 draws on Themes 1 and 3, covering markets and business behaviour. Paper 2 draws on Themes 2 and 4, covering the national and global economy. Both papers require Sections A and B and one extended response chosen from two in Section C. Read the marks on each part and plan the depth of analysis accordingly.
Paper 3 connects the four themes. It uses two data-response sections, each with extended open-response choices. Work from the supplied economic context. A useful response can connect a change in a single market to economy-wide effects, while explaining why the wider result depends on scale and conditions.
Official specifications and sources
Worked evaluation of a tax on a polluting product
Suppose use of a product imposes pollution costs on people outside the transaction. An indirect tax can raise the price consumers pay and reduce output. If it reflects the external cost at the socially efficient quantity and the model’s assumptions hold, the tax can move the market closer to that quantity. Explain the external cost and whose behaviour changes before drawing the diagram.
Now test the mechanism. If consumers have few close substitutes, quantity may respond less to a given price rise. Producers could also change production methods rather than cut output if the tax is targeted directly at emissions. Compare which behaviour the policy is designed to alter. A tax on sales and a charge on pollution can give firms different incentives.
A judgement might support an emissions charge if emissions can be measured and firms can reduce them. A product tax may be easier to administer where monitoring is difficult, but could be less closely linked to the harm. Give the practical criterion that carries the most weight and explain how the evidence affects the answer.
Fencing Method for an economics term
Start with The tax changes behaviour. Add detail. The tax can raise the price paid for a polluting product. Refine the tone. The higher price can reduce quantity demanded along the existing demand curve. Tighten the logic further by writing Quantity demanded may fall, with the size of the fall depending on price responsiveness. Transfer the reasoning to a product with readily available substitutes.
Try tax incidence. Identify the price paid by buyers and the price sellers receive after the tax. Compare how much each changes. Then connect the split to relative elasticities. The group that legally pays the tax can differ from the group bearing most of its economic burden.
Explain the diagram in words
Label the axes, curves and equilibrium. In an externality question, identify whether the external effect changes the relationship between private and social costs or benefits. Explain how the diagram connects to the policy and to the case. A well-labelled diagram lets the reader see the mechanism, while the prose explains its relevance.
When evaluating, identify one assumption or limit that changes the outcome. An estimated external cost may be uncertain. Demand may respond differently over time. Another market may absorb part of the effect. Explain which limit matters most for the question rather than appending a list of possible problems.
Link microeconomic and macroeconomic evidence
Imagine an energy price rise. A firm may face higher production costs and a household may reduce spending on other items. A macroeconomic claim about inflation or output needs evidence about how widespread the rise is and how other groups respond. Link the mechanisms and distinguish the sector effect from the aggregate claim.
Use this check in Paper 3 practice. Write the first market response, then name what would make it large enough to matter for the economy. If the effect depends on monetary or fiscal policy, say how that response might alter the chain. End with the most important condition for your conclusion.
Practise an extended response without a stock conclusion
Choose the two most plausible arguments and give each an explicit mechanism and a relevant detail. Then compare them using the outcome in the prompt. If the policy is meant to improve efficiency, explain why distribution or enforcement matters to that outcome or why a different criterion also deserves weight.
In the conclusion, choose the stronger argument under the stated conditions. Say what evidence would change the judgement. For example, a wider availability of substitutes might strengthen a claim about a demand response, while a smaller external cost estimate might weaken the case for a large charge.
Frequently asked questions
Can a diagram help with evaluation? Yes, if it makes the condition or comparison clear and you explain it. Should I use all the extract figures? Select the figures that help answer the question. Does one consequence settle the answer? Compare it with the strongest countervailing effect and decide which matters more.